Tag Archives: accounting control fraud

The Faux Hyper-Meritocracy that Threatens to Destroy Us

Posted on October 8, 2013 by | 7 comments

By William K. Black

I have written two prior columns about Tyler Cowen’s praise of the faux “hyper-meritocracy.”  Cowen assumes that productivity determines personal wealth and is measured by wealth.  He celebrates financial managers as the exemplars of this hyper-meritocracy.  In my first column I explained that it should have given Cowen pause that his meritocratic vanguard caused the greatest loss of wealth to society and that so many financial CEOs not only destroyed societal wealth, but also became wealthy through accounting control fraud.  I explained how the bank CEOs that led the accounting control frauds also created the Gresham’s dynamics that suborned other professions (e.g., appraisers, loan brokers, and auditors) that cause bad ethics to drive good ethics out of the professions.  Cowen could not have picked a less meritocratic group as his heroes than the financial CEOs running the systemically dangerous institutions (SDIs).

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Why do Conservatives Oppose Prosecuting Elite Corporate Frauds?

Posted on September 30, 2013 by | 10 comments

By William K. Black
(Cross posted at Benzinga.com)

There are at least four principles that virtually all conservatives purport to support – except when the potential defendant is socially elite.  I have written previously about two of these principles on several occasions – the need for accountability and “broken windows” theory that calls for the prosecutors to make the prosecution of even minor street crimes a high priority if they have, even indirectly, a material effect on the community.

The third principle is that it is vital to punish in order to deter crime.  Gary Becker, the very conservative Nobel laureate in economics, emphasized this point (again, in the context of street crime).  Under Becker’s theory of crime our current practices of allowing elite banksters to become wealthy through leading the “sure thing” of accounting control fraud with immunity from the criminal laws will predictably lead to new, larger epidemics of fraud that will continue to cause our recurrent, intensifying financial crises.  It is rare, however, to find a prominent conservative who is demanding a priority effort to prosecute the elite bank officers who ran those frauds.  I know of no conservative member of Congress publicly making that demand today.  Senator Chuck Grassley has previously criticized the Obama administration’s failure to prosecute elite bankers.

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The SEC Flacks Paint Lehman’s Looters as the Victims of a “Political” SEC

Posted on September 11, 2013 by | 4 comments

By William K. Black

This is the second installment in a three-part series correcting the NYT propaganda that seeks to transmute the SEC’s refusal to hold any of Lehman’s looters accountable for their myriad frauds.  For the purposes of this article I assume that the reporters have accurately represented the SEC officials’ positions.  I discuss the journalists’ analytical flaws.  In my next column I’ll address critical facts excluded by the SEC and the reporters.  Those facts demonstrate that Lehman was an “accounting control fraud.”  The NYT article ends with this morality play about the SEC’s anti-enforcement “team”:

“The S.E.C. team also concluded that Repo 105 would not have been ‘material’ to investors because the firm’s leverage ratio was trending downward regardless of Repo 105.

That conclusion set off a wave of dissent inside the S.E.C. Senior accountants and the head of the S.E.C. unit that oversaw corporate disclosures questioned the findings. Ms. Schapiro urged Mr. Canellos to keep digging.

But Mr. Canellos, a former federal prosecutor who is now the co-head of the S.E.C.’s enforcement unit, did not budge. Despite the political pressure, he told colleagues at one of the meetings, they could not bring a case if the evidence was lacking.

‘Our job is to seek justice,’ he said.”

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Not with a Bang but a Whimper – the SEC Enforcement Team’s Propaganda Campaign

Posted on September 10, 2013 by | 5 comments

By William K. Black

The New York Times has one of those “inside” stories that unintentionally demonstrate the collapse of justice and financial reporting.  This genre involves the media reporting gravely (and uncritically) the administration’s claims that its failure to prosecute any elite for the largest and most destructive financial frauds in history actually demonstrates the exceptional ethical rectitude of the non-prosecutors and non-enforcers.  Journalists, unlike alchemists, can transmute dross into gold.  In the NYT’s account a pathetic failure of competence, integrity, and courage at the SEC is reimagined as a fantastic triumph of vigor and ethics on the part of the SEC enforcement attorney who refused to seek to hold Lehman’s senior officers accountable for their violations but otherwise became the scourge of elite frauds.  In the end, he is promoted for his dedication to “justice” and is now the anti-enforcement leader of the SEC’s enforcement group.

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Larry Summers’ Take on Efficient Markets and Regulators: Brilliance v. Idiots

Posted on September 2, 2013 by | 3 comments

By William K. Black
(cross posted from Benzinga.com)

Perhaps the only useful thing to come out of the Obama administration’s inept contest between Larry Summers and Janet Yellen as Ben Bernanke’s successor is the purported agreement among economists and other policy makers that the Fed Chair should make the introduction of effective regulation and supervision by the Federal Reserve a top priority.  It would be even better if this agreement were real and would be sustained.  Regulation and supervision have never risen above tertiary concerns at the Fed and every institutional pressure will push the new Fed Chair to ignore supervision.  

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Jared Bernstein Tries to Reimagine Larry Summers as a Foe of the Banksters

Posted on August 30, 2013 by | 9 comments

By William K. Black

Jared Bernstein was Vice President Joe Biden’s chief economist and was the strongest economic voice within the Obama administration opposing inflicting austerity on the Nation in response to the Great Recession.  His August 28, 2013 column is entitled “Summers and the Banks.”  He begins by acknowledging that Obama had dreadfully “misplayed” the choice of Ben Bernanke’s successor as Fed Chair.

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Mueller: I Crippled FBI Effort v. White-Collar Crime, My Successor Will Make it Worse

Posted on August 26, 2013 by | 7 comments

By William K. Black
(Cross posted at Benzinga.com)

FBI Director Robert Mueller is taking his victory lap as he steps down after 12 years of service.  I have done three articles in a series that explains how the Mortgage Bankers Association (MBA) conned the FBI into adopting the Tea Party’s mythology about the causes of the crisis – virginal banks beset by ultra-sophisticated fraudulent hairdressers.  The MBA created a faux definition of mortgage fraud under which the bank and its senior officers were always the victims instead of the perpetrators.

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Think Global, Act Local: the SacBee Needs to Write about its U.S. Attorney

Posted on August 21, 2013 by | 2 comments

By William K. Black

The Sacramento Bee is a paper with a fine pedigree that just wrote a powerful editorial entitled: “Wall Street needs to be schooled in the rule of law.”

 “When the president feels the need to call out his own people for not moving fast enough on new rules for Wall Street, you know that things have really bogged down.

That’s what Barack Obama did Monday, urging top financial regulators to get going on enforcing the Dodd-Frank law, passed by Congress three years ago but still adamantly opposed by big banks.

Wall Street’s freewheeling ways and outright fraud worsened the worst financial crisis this nation has faced since the Great Depression. Nearly five years later, many large financial institutions are making big profits again, but relatively few wrongdoers have seen the inside of a prison cell.

Precious little has truly changed.

Who gets the short end of the foot-dragging? The vast majority of Americans, of course, those who aren’t favored clients of Wall Street firms. You can bet we’re the ones who will be left holding the bag if there’s another crash because proper safeguards aren’t in place.”

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The Incredible Con the Banksters Pulled on the FBI

Posted on August 16, 2013 by | 12 comments

By William K. Black

This is the second in my series of articles based on the FBI’s most (2010) “Mortgage Fraud Report.”

In my first column I began the explanation of how many analytical conclusions one can draw from a close reading of what is left out of the FBI report.

In particular, I emphasized the death of criminal referrals by the SEC and the banking regulatory agencies.  The FBI report implicitly confirms the investigative reporting of David Heath that first quantified the death of criminal referrals by the banking regulatory agencies.

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The FBI’s 2010 Mortgage Fraud Report Reveals Why the Banksters Love Holder

Posted on August 14, 2013 by | 9 comments

By William K. Black

The Obama administration’s continuation of the Bush administration’s refusal to prosecute the elite banksters (or even the vastly lower status CEOs of the fraudulent mortgage bank) that drove the crisis has made it clear that the rule of law no longer applies to wide ranges of life and that crony capitalism will continue to reign.

One of the difficulties we have is that because the last two administrations have fanatical devotees of the cult of the Virgin Crisis – the myth that the ongoing crisis was the first in modern times conceived without sin (control fraud) – that it is exceptionally difficult to know what their creed is.  DOJ has refused to prosecute any elite banker for mortgage loan origination fraud.  The rare prosecutions it has brought against senior officials of fraudulent loan originator (a large, but obscure regional mortgage bank: Taylor Bean) did not prosecute the officials for their fraudulent origination (or sale) of loans.  The Taylor Bean officials were only prosecuted for their fraud against the TARP program – and only because Neil Barofsky (SIGTARP) made the criminal referral about that fraud and pushed relentlessly to force the Department of Justice to prosecute.  With zero prosecutions of the massively fraudulent home lenders that drove the crisis to we are left with no information on why committing hundreds of thousands of frauds via the twin epidemics of loan origination fraud (inflating appraisals and making endemically fraudulent “liar’s” loans) is no longer a crime that the FBI investigates and DOJ prosecutes.  No senior DOJ or FBI official, of course, is stupid enough to state openly why we no longer prosecute even the CEOs of long-bankrupt mortgage banks that led these accounting control frauds.  The U.S. Attorney for Sacramento, one of the epicenters of accounting control fraud, was foolish enough to attempt to explain why he did not investigate or prosecute the banksters:

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